I-T takes Rahman to HC on charge of using his charity for tax evasion

The Income-tax department has taken Oscar-winning music composer AR Rahman to Madras High Court (HC) alleging he evade tax by diverting his income through his non-profit foundation involved in charity.

The court has sent Rahman a notice seeking his response to the allegation of the I-T department that he routed about Rs 3.5 crore through his AR Rahman Foundation. 

The I-T department had moved the court in an appeal against the September 2019 order of the Income Tax Appellate Tribunal which had dismissed an order of the Principal Commissioner of Income Tax in Chennai asking Rahman to pay tax on the amount. 

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Rahman had signed an agreement with UK-based Libra Mobiles to compose exclusive ringtones for the company. He was to be paid about Rs 3.47 crore for the contract in the 2011-12 assessment year. Rahman, however, directed to pay the amount directly to the foundation, senior lawyer T R Senthil Kumar, appearing for the department, told a bench of justices TS Sivagnanam and V Bhavani Subbaroyan. This amounted to diversion of funds. 

The I-T department filed a case saying the foundation did not have a Foreign Contribution Regulation Act (FCRA) licence at that time to receive payment from a foreign organisation.

Since the contract was signed by Rahman, he should have first received the amount and then transferred it to the foundation. Therefore, the amount should be considered as income taxable in his hands, it said.

Rahman moved the appellate tribunal against the I-T department’s claim. The tribunal said the Centre had given “post facto approval” for the contribution. Hence, the amount is not taxable.

AR Rahman, along with his family members, had formed the AR Rahman Foundation in 2009 to “help children from underprivileged backgrounds through music, education and leadership building.” The foundation was given FCRA licence in February.